The increase in the ethanol price would improve the ability of the sugar mills, the largest producers of the bio-fuel, to pay farmers on time for cane supplies.
The government is likely to raise the price of ethanol by around 5% for supplies to oil-marketing companies for blending with petrol in the next marketing year through November 2018, sources told FE.
The Cabinet Committee on Economic Affairs would soon take up a proposal to increase the ethanol price to around Rs 41 per litre for the 2017-18 marketing year from Rs 39 this year, said the sources. The price has been arrived at by a panel comprising senior officials with the ministries of petroleum, food and finance, factoring in the cost of production of the bio-fuel, said the sources.
The increase in the ethanol price would improve the ability of the sugar mills, the largest producers of the bio-fuel, to pay farmers on time for cane supplies. If key states like Gujarat, Delhi, Haryana, Punjab, Maharashtra, Uttar Pradesh, Madhya Pradesh scrap taxes on inter/intra-state movement of ethanol, as was envisaged under the goods and services regime, sugar mills in some of these states could save roughly Rs 1-2 per litre more. This would also add to their ability to speed up payments to cane farmers.
Karnataka recently scrapped the requirement of permits from the excise department for the movement of ethanol, becoming the first state to implement the amendments to the Industries Development and Regulation (IDR) Act.
The latest amendment to the IDR Act removes any sort of confusion to give states power to regulate only alcohol meant for human consumption, while the Centre will have power over industrial alcohol like ethanol that is not consumed by human beings. The decision by the Karnataka government seems to endorse this basic principle of the IDR amendment.
Sugar mills that produce ethanol may now cite the Karnataka government’s move to seek the abolition of such practices in other states, especially in largest ethanol producer Uttar Pradesh. Ironically, while Congress-ruled Karnataka has implemented the amendments to the IDR Act to make inter-state ethanol supplies easier, states ruled by the BJP, most notably UP and Maharashtra, are yet to follow suit despite the fact that the ethanol blending programme has been promoted by Prime Minister Narendra Modi. Following the IDR Act, the Union food ministry had even written to various states, explaining clearly the division of power to regulate both potable and industrial alcohol.
In fact, a state like Uttar Pradesh has traditionally resisted any idea of digitisation of the excise department even for routine stuff. This makes the matter worse for ethanol suppliers.
The government had first proposed the 5% blending of ethanol with petrol in 2003 and made it mandatory in 2007.
In December 2013, the Sharad Pawar panel mooted doubling the blending limit to 10%, which was reiterated by the Cabinet Committee on Economic Affairs in April 2015. In August 2015, Prime Minister Narendra Modi directed ministries concerned to look for ways to make the proposed blending programme a reality soon.